THE COURTS
Title 204—JUDICIAL SYSTEM GENERAL PROVISIONS
PART V. PROFESSIONAL ETHICS AND CONDUCT
[ 204 PA. CODE CH. 81 ]
Proposed Amendments to Rule of Professional Conduct 1.15 Regarding the Disposition of Unclaimed or Unidentified Funds in Pennsylvania IOLTA Trust Accounts
[47 Pa.B. 1122]
[Saturday, February 25, 2017]Notice is hereby given that The Pennsylvania Interest on Lawyers Trust Account Board (IOLTA Board) of the Supreme Court of Pennsylvania is considering recommending that the Court amend Pennsylvania Rule of Professional Conduct 1.15 to provide for the disposition of unclaimed or unidentified funds in Pennsylvania IOLTA trust accounts.
Over the past several years the IOLTA Board has noticed an increase in attorneys seeking guidance on the ethical distribution of funds in an IOLTA trust account when the owner of the funds cannot be identified or located. It is an especially common question when an attorney is winding down a law practice in preparation for retirement or when attempts to contact a former client in order to return funds are unsuccessful. Currently, Pennsylvania Rule of Professional Conduct 1.15 does not specifically address the disposition of these funds.
Pennsylvania IOLTA trust accounts are used to hold ''qualified funds'' that are received as the result of the practice of law in Pennsylvania. As defined in Rule 1.15, qualified funds are generally those in which a client or other third party maintains an interest (such as pre-paid retainers, legal settlements, etc.) which are either nominal in amount or are reasonably expected to be held for such a short period of time that sufficient income will not be generated to justify the expense of administering a segregated account. Pursuant to the Supreme Court of Pennsylvania's July 17, 1996 Order, the IOLTA Board holds the beneficial interest in the interest income which is generated by the principal held in these accounts. With the approval of the Supreme Court, the IOLTA Board uses this interest income to provide civil legal aid grants to nonprofit organizations and law school clinical programs that serve low-income and disadvantaged Pennsylvanians with services ranging from representation for victims of domestic abuse, advocacy for individuals with disabilities, foreclosure prevention, as well as many other civil matters where a basic human need, such as access to shelter, nutrition, or healthcare is at stake. These important services help to increase access to justice and also ease the burden on the judicial resources necessary to assist pro se litigants.
In developing the proposed amendments, the IOLTA Board reviewed the rules of other states pertaining to unclaimed or unidentified funds held in IOLTA accounts. As recently as November 5, 2015, the Arkansas Supreme Court adopted a rule which requires attorneys that have been unable to identify or locate the owner of funds held in an IOLTA trust account for a period of two years, to direct such funds to the Arkansas Access to Justice Foundation. Illinois and West Virginia have also adopted similar rules with varying periods of time provided in which an attorney must make efforts to identify and return the funds (twelve months and four months, respectively).
Additionally, Pennsylvania Rule of Disciplinary Enforcement 324 currently provides direction on the disposition of unknown purported client funds in a number of scenarios where it becomes necessary to appoint a conservator to manage the affairs for an attorney; such as when an attorney is subject to an emergency interim suspension and there is no known successor to the attorney's practice. If the state of the financial accounts and records of the absent attorney render a determination as to ownership of purported client funds unreasonable and impractical, conservators are directed to petition the appointing court for permission to direct such funds to the Pennsylvania Lawyers Fund for Client Security, whose mission is to reimburse victims of attorney dishonesty in the practice of law and to promote public confidence in the legal profession and administration of justice. Consequently, just as Pennsylvania Rule of Disciplinary Enforcement 324 provides for the disposition of unknown funds in a manner which promotes the protection of former clients that may subsequently turn to the Pennsylvania Lawyers Fund for Client Security for assistance; so too would directing unclaimed or unidentified IOLTA funds to the IOLTA Board (in scenarios where a conservator is not needed) advance the mission of the IOLTA Board to fund civil legal assistance for low-income and disadvantaged Pennsylvanians.
In order to provide clarity on the disposition of unclaimed or unidentified funds held in Pennsylvania IOLTA trust accounts, the IOLTA Board proposes amending Pennsylvania Rule of Professional Conduct 1.15 so that subsection (u) would provide that, should reasonable efforts to identify or locate the owner of funds in a Pennsylvania IOLTA account prove unsuccessful, the unclaimed or unidentified funds would be paid to the Pennsylvania IOLTA Board along with the name and last known address of each person (if known) appearing in the law firm's records as being entitled to the funds in addition to a description of the efforts undertaken to identify or locate the owner. The amended language would also provide that if the lawyer, law firm, or deceased lawyer's estate which remitted the funds to the IOLTA Board, subsequently identifies and locates the owner of the funds within two years following the payment to the IOLTA Board, the IOLTA Board shall refund the funds to the lawyer, law firm, or deceased lawyer's estate, who must provide a verification attesting that funds have been returned to the owner.
Interested persons are invited to submit written comments by mail, e-mail, or fax regarding the proposed amendments to: Pennsylvania Interest on Lawyers Trust Accounts Board, PO Box 62445, Harrisburg, PA 17106-2445: fax number (717) 238-2003; e-mail address paiolta@pacourts.us on or before April 12, 2017.
By the Pennsylvania Interest on Lawyers Trust
Account Board of the Supreme Court of PennsylvaniaSTEPHANIE S. LIBHART,
Executive Director
Annex A
TITLE 204. JUDICIAL SYSTEM GENERAL PROVISIONS
PART V. PROFESSIONAL ETHICS AND CONDUCT
Subpart A. PROFESSIONAL RESPONSIBILITY
CHAPTER 81. RULES OF PROFESSIONAL CONDUCT
Subchapter A. RULES OF PROFESSIONAL CONDUCT § 81.4. Rules of Professional Conduct.
The following are the Rules of Professional Conduct:
CLIENT-LAWYER RELATIONSHIP Rule 1.15. Safekeeping Property.
* * * * * (t) The IOLTA Board shall hold the beneficial interest in IOLTA Funds. Monies received in the IOLTA program are not state or federal funds and are not subject to Article VI of the act of April 9, 1929 (P.L. 177, No. 175) known as The Administrative Code of 1929, or the act of June 29, 1976 (P.L. 469, No. 117).
(u) Unclaimed or Unidentifiable IOLTA Funds
(1) When a lawyer, law firm, or estate of a deceased lawyer, cannot, using reasonable efforts, identify or locate the owner of funds in its Pennsylvania IOLTA account for a period of at least two (2) years, it shall pay the funds to the Pennsylvania IOLTA Board. At the time such funds are remitted, the lawyer shall submit to the IOLTA Board the name and last known address of each person appearing from the lawyer's or law firm's records to be entitled to the funds, if known; a description of the efforts undertaken to identify or locate the owner; and the amount of any unclaimed or unidentified funds.
(2) If, within two (2) years of making a payment of unclaimed or unidentified funds to the Pennsylvania IOLTA Board, the lawyer, law firm, or deceased lawyer's estate identifies and locates the owner of funds paid, the IOLTA Board shall refund the sum to the lawyer, law firm, or deceased lawyer's estate. The lawyer, law firm or deceased lawyer's estate shall submit to the IOLTA Board a verification attesting that the funds have been returned to the owner. The IOLTA Board shall maintain sufficient reserve to pay all claims for such funds.
[(u)] (v) Every attorney who is required to pay an active annual assessment under Rule 219 of the Pennsylvania Rules of Disciplinary Enforcement (relating to annual registration of attorneys) shall pay an additional annual fee of $30.00 for use by the IOLTA Board. Such additional assessment shall be added to, and collected with and in the same manner as, the basic annual assessment. All amounts received pursuant to this subdivision shall be credited to the IOLTA Board.
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[Pa.B. Doc. No. 17-321. Filed for public inspection February 24, 2017, 9:00 a.m.]
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